Spain experienced an eventful year in 1998, as significant developments took place at both international and national levels. One that had a far-reaching effect was the extradition request by the Spanish government of the former Chilean dictator, Gen. Augusto Pinochet Ugarte, who was arrested in October in London on a warrant signed by Spanish and British judges. The case became a cause célèbre, prompting extradition requests from France, Switzerland, and Sweden. Pinochet stood accused of a host of crimes, ranging from individual cases of citizens of the prosecuting countries being killed or "disappeared" to the widespread use of torture and kidnapping, crimes against humanity, and even genocide.

The Pinochet affair polarized Spain between those who approved of the extradition request (70%) and those who opposed it on the grounds that it would destabilize the fragile Chilean democracy. The case proved the maturity of the relatively young democratic regime in Spain; the right-wing government headed by Prime Minister José Aznar López decided not to interfere with the decisions of the judiciary (even though legally able to do so) and sanctioned the official extradition warrant with Cabinet approval.

Spanish foreign policy during 1998 concentrated on Latin America and Europe, but the traditional links with the Maghreb nations (Morocco, Algeria, and Tunisia) remained, exemplified by bilateral agreements and mutual cultural and economic visits. Prime Minister Aznar and a delegation of business leaders visited several Latin-American countries, which allowed Spain to establish closer relations there, especially with Peru and Colombia. The visit by the foreign minister to Cuba ended a period of tension affecting relations between Madrid and Havana. This improved relationship had been in evidence when Pres. Fidel Castro of Cuba met Prime Minister Aznar at the Ibero-American conference in Portugal, a periodic major diplomatic and political event that all of the countries of Latin America, plus Portugal and Spain, attended.

The year marked a turning point in the internal politics of Spain. The October regional elections in the Basque country consolidated the influence and power of two major nationalist parties, the Basque Nationalist Party (PNV) and Herri Batasuna (HB). The former, the mainstream moderate nationalist organization, confirmed its position as the largest group in the Autonomous Parliament, and the latter (to the left within the nationalist spectrum) made important gains. A reinforced self-confidence resulting from these triumphs allowed the Euskadi Ta Askatasuna (ETA) separatist group (generally regarded as the military wing of HB) to confirm a cease-fire that had been declared in September. The example of the cease-fire and the subsequent peace agreement in Northern Ireland played a substantial role in helping to ease the Basque-Spanish conflict. Spain, in turn, further facilitated this process by promising generous compensation for the victims of ETA terrorism and thereby helping to neutralize potential opposition to the ensuing negotiations. The open-minded attitude of the Aznar government on the issue seemed to be rewarded by an increased share of the vote for the centre-right Popular Party (in charge of the national government in Madrid) in the Basque elections. Nationalist fervour culminated in a "summit" of the major nationalist parties of Catalonia, the Basque country, and Galicia, which ended with the "Barcelona Declaration," stating common goals and strategies to achieve increased autonomy but within the Spanish state.

Ecological issues came to the fore in Spain during the year. A vigorous public debate created a new awareness of topics such as environmental pollution and deforestation, and a host of organizations competed to spread the ecological message. The government, conscious of the political implications of this new concern, was also party to the debate and promised active cooperation.

The economy suffered the effects of the global recession unleashed by the financial crisis in Asia, and the Ministry for the Economy reduced its estimate of economic growth for 1999 from 3.9% to 3.7%. The sharp decline of share prices on the Madrid and Barcelona stock exchanges (on average about 20%) created cause for concern among both business associations and trade unions. The latter voiced their concern at the risk of increased unemployment, which remained around 18%.

As a reaction against attempts to liberalize the current abortion laws, Roman Catholic groups renewed their antiabortion campaigns. In other developments former interior minister José Barrionuevo was imprisoned for his role in the 1983 kidnapping of a businessman; salaries increased an average of 2.3%; and illegal immigration from North Africa continued to be a problem that fed worries about racism and xenophobia. A study published during the year revealed deep-seated antagonism toward immigrants and foreigners in general in Spain as well as the existence of well-organized, though small, neo-Nazi groups.